Brazil refinery mishaps hobble 10 percent of Brazil fuel output

RIO DE JANEIRO (Reuters) - Serial failures at a Petrobras refinery have hobbled about a tenth of Brazil’s crude-processing capacity, company and union officials said on Monday, raising safety and efficiency concerns at the financially troubled state-led oil company.

The Brazil's state-run Petrobras oil company headquarters is pictured in Rio de Janeiro, Brazil, January 28, 2016. REUTERS/Sergio Moraes

An Aug. 31 power outage and fire, followed by a sulfur tank collapse on Monday, forced a complete shutdown and then slowed the restart of the 242,000-barrel-per-day (bpd) REDUC refinery near Rio de Janeiro owned by Petroleo Brasileiro SA, as Petrobras is formally known, the union representing workers at the plant said.

Petrobras said late Monday it does not expect REDUC, which produces diesel, gasoline, jet fuel and other refined products, to be at full capacity until Sept. 12, nearly two weeks after the power outage. The plant is one of its 15 Brazilian refineries.

However, the company said the problems will not affect the supply of fuels to the Brazilian market.

“It is just another example of the decay of equipment and poor management at the refinery,” said Simão Zanardi, president of Sindipetro-Caxias, the main union representing employees at REDUC. “This is a place where accidents are waiting to happen.”

Zanardi’s union is in contract talks with Petrobras and is fighting budget cuts that Chief Executive Officer Pedro Parente says are necessary to reduce the company’s nearly $125 billion of debt, the largest in the world oil industry.

Zanardi says REDUC should have been able to resume full operations within about 72 hours, but a gasoil fire caused by a leak in the wake of the shutdown destroyed a control panel in a vacuum distillation tower. Petrobras confirmed the fire.

On Monday, as production was ramping up, the top of a sulfur storage tank collapsed. Petrobras said the sulfur tank problem “did not have an impact on the restart of refinery operations that have been realized gradually since the Aug 31 shutdown.”

Labor authorities had blocked access to the tank’s roof after a REDUC worker died when another tank roof collapsed during a January inspection, the union said.

REDUC on Monday was operating at less than 15 percent of capacity Zanardi said, limited in part by environmental rules that restrict the amount of crude that can be processed without functioning treatment processes to remove sulfur from toxic hydrogen sulfide (H2S) gas that is produced during refining.

Petrobras declined comment on REDUC processing levels.

REDUC’s main U-1210, 141,500 bpd vacuum distillation unit is offline, Zanardi said. One of two 50,300 lubricant vacuum units is also offline and the other is only processing 6,000 bpd, or 12 percent of capacity, and is operating without H2S treatment.

REDUC’s U-1250 catalytic cracking unit is operating at 6,000 bpd, or 13 percent of capacity, also without H2S treatment, he added.

No one was hurt in Monday’s tank collapse or the Aug. 31 fire.

Last week, Petrobras said more than a fifth of its employees have agreed to quit their jobs in a buyout plan aimed at saving 33 billion reais ($10.1 billion) by 2020.

($1 = 3.278 Brazilian reais)

Reporting by Jeb Blount; Editing by Diane Craft and Christian Schmollinger